Bank Negara likely to announce property curbs next week

KUALA LUMPUR: Bank Negara is expected to announce next week measures to curb property speculation and a programme to create financial awareness for the youth, said sources.

The introduction of a loan to value requirement for people buying their third house or more has been talked about, but central bank governor Tan Sri Dr Zeti Akhtar Aziz said any new rules regarding property loans would not be a blanket clamp.

“We want to promote house ownership but we want it to be done in an orderly manner and we don’t want speculative activity,’’ she said after a media engagement programme at the Global Islamic Finance Forum.

“So, for first time house owners and perhaps even the second one, any new rules will not apply.’’

Zeti acknowledged there were pockets of property bubbles in the country, but on the whole, steep property rises were not seen throughout the country.

“If we consider there is any imminent risk of a property bubble, of course we will take pre-emptive action. We are not going to wait for the bubble to happen before taking action,’’ she said.

Debate over the implementation of a loan to value ratio has been ongoing and the understanding is that people buying their third house or more would be required to pay a larger downpayment than the current standard minimum of 10% of the value of a home.

On Wednesday, Deputy Finance Minister Datuk Donald Lim Siang Chai told parliament Bank Negara was studying possible policy changes for those taking up loans to buy a third house or more.

He also said prices of properties in several locations in large cities in the country had shot up due to speculation and if the situation was not controlled at an early stage, home prices would go up beyond the consumer’s financial means and may affect socio-economic growth.

Lim said people would also face difficulty in buying houses, which might lead to an increase in debts.

“The loan-to-value ratio will be specific in nature and its implications on the country’s economic growth will be taken into account,” he added.

Zeti said the banking system through its own risk management and governance process was addressing rising property prices and Bank Negara had other pre-emptive areas it might take up.

One example she gave was on financial literacy and management especially for the younger population below the age of 30.

“We want them to be better positioned to manage their finances when they acquire a car and a house in the beginning of the career,’’ she said, adding that the central bank would introduce programmes for those purposes and was ready to deal with any excesses through a wide range of instruments.

Commenting on the mega Islamic banking licences which Bank Negara would issue by the end of the year, Zeti said two parties had been issued conditional licences but expected one of them to be given a full licence by the end of the year after agreeing to the terms set out by Bank Negara.

“We believe the kind of team they have proposed to bring in will contribute significantly to the development and deepening of the market in terms of product development, structuring of Islamic instruments, expertise and participation in the various financial markets including the foreign exchange market since most of their business will be international,’’ she said.

“This will contribute significantly to our financial system.”

The mega Islamic banks would have a paid-up capital of US$1bil each and Zeti said those banks would be the “final jigsaw (piece) to our financial system.”

She said the licences drew interest worldwide but presented challenges to prospective bidders based on the requirements placed by Bank Negara, not only on the capital needs but also in their proposed business plans and the team the licence holder would bring into Malaysia.

“There were two who have been identified and they are making preparations to meet in concrete terms what they have proposed to us. They will of course do some retail business but the focus will be international business as the objective of our liberalisation is to enhance linkages around the world,’’ she said.